Clean Air Issues in the 112 th Congress

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1 James E. McCarthy Specialist in Environmental Policy December 31, 2012 CRS Report for Congress Prepared for Members and Committees of Congress Congressional Research Service R41563

2 Summary Air quality has improved substantially in the United States in the 40 years of EPA s Clean Air Act regulation, but more needs to be done, according to the agency s science advisers, to protect public health and the environment from the effects of air pollution. Thus, the agency continues to promulgate regulations addressing air pollution using authority given it by Congress more than 20 years ago. In the 112 th Congress, Members from both parties raised questions about the costeffectiveness of some of these regulations and/or whether the agency has exceeded its regulatory authority in promulgating them. Others in Congress have supported EPA, noting that the Clean Air Act, often affirmed in court decisions, authorized or required the agency s actions. EPA s regulatory actions on greenhouse gas (GHG) emissions were one focus of congressional interest. Although the Obama Administration consistently said that it would prefer that Congress pass new legislation to address climate change, such legislation was not considered in the 112 th Congress. Instead, EPA developed GHG regulations using its existing Clean Air Act authority. EPA finalized GHG emission standards for cars and light trucks on April 1, 2010, and August 28, 2012, and for larger trucks on August 9, The implementation of these standards, in turn, triggered permitting and Best Available Control Technology requirements for new major stationary sources of GHGs. It was the triggering of standards for stationary sources (power plants, manufacturing facilities, etc.) that raised the most concern in the 112 th Congress: legislation was considered in both the House and Senate aimed at preventing EPA from implementing these requirements. In the first session of the 112 th Congress, the House passed H.R. 1, which contained provisions prohibiting the use of appropriated funds to implement various EPA GHG regulatory activities, and H.R. 910, a bill that would have repealed EPA s endangerment finding, redefined air pollutants to exclude greenhouse gases, and prohibited EPA from promulgating any regulation to address climate change. In the Senate, H.R. 1 was defeated, and an amendment identical to H.R. 910 (S.Amdt. 183) failed on a vote of EPA took action on a number of other air pollutant regulations, generally in response to court actions remanding previous rules. Remanded rules included the Clean Air Interstate Rule (CAIR) and the Clean Air Mercury Rule rules designed to control the long-range transport of sulfur dioxide, nitrogen oxides, and mercury from power plants through cap-and-trade programs. Other remanded rules included hazardous air pollutant ( MACT ) standards for boilers and cement kilns. EPA addressed the court remands through new regulations that have now been promulgated. Many in Congress viewed the new regulations as overly stringent. The House passed four bills (H.R. 2250, H.R. 2401, H.R. 2681, and H.R. 3409) to delay or revoke the new standards and change the statutory requirements for their replacements. In addition to the power plant and MACT rules, EPA also reviewed ambient air quality standards (NAAQS) for ozone, particulates, and other widespread air pollutants. These standards serve as EPA s definition of clean air, and drive a range of regulatory controls. The revised NAAQS also faced opposition in the 112 th Congress. As passed by the House, H.R and H.R would have amended the Clean Air Act to require EPA to consider feasibility and cost in setting NAAQS, and H.R would have prevented EPA from setting standards for ambient concentrations of rural dust. Congressional Research Service

3 Contents Introduction... 1 EPA s Greenhouse Gas Regulations... 2 Legislation on Climate Change... 5 Emissions from Power Plants... 7 Cross-State Air Pollution/Clean Air Interstate Rule (CAIR)... 8 North Carolina v. EPA... 8 EPA s CAIR Replacement: The Cross-State Air Pollution Rule... 9 Judicial and Legislative Options for Overturning the Cross-State Rule The Utility MACT/MATS Rule: Addressing Mercury and Other Hazardous Air Pollutants Background New Jersey v. EPA Other Mercury/Air Toxics Issues The Utility MACT/Mercury and Air Toxics Standards Costs, Benefits, Technology, and Timing Cumulative Impacts of EPA Rules Air Quality Standards Background Judicial Reviews CASAC s Role Adequacy of Monitoring NAAQS Implementation Ozone and PM NAAQS Reviews Ozone Particulate Matter (including Farm Dust ) Other Issues Portland Cement MACT Boiler MACT EPA s Position on Its Regulatory Actions Tables Table 1. Status of NAAQS Reviews Contacts Author Contact Information Congressional Research Service

4 Introduction In the 112 th Congress, interest in air quality issues was dominated by efforts to prevent the Environmental Protection Agency (EPA) from promulgating and implementing new emission control requirements. Often under court order, EPA has used the authorities Congress gave it in the Clean Air Act of 1970 and subsequent amendments in 1977 and 1990 to address longstanding issues posed by emissions from mobile sources, electric utilities, and a wide range of industrial sources. One focus of congressional interest was EPA regulatory action to limit greenhouse gas (GHG) emissions 1 using existing Clean Air Act authority. Members from both sides of the aisle, including a majority of the House, expressed concern that EPA was proceeding with GHG regulations that could have major economic impacts, without direct congressional authorization, and/or that EPA should delay taking such action until Congress specifically authorizes it. The Administration countered that it would prefer for Congress to pass new legislation to control greenhouse gas emissions, but the Clean Air Act already requires action: a 2007 Supreme Court decision interpreting EPA s Clean Air Act authority found that the agency must weigh whether GHG emissions endanger public health and welfare and, if it concludes that they do, proceed with regulation. 2 The 111 th Congress struggled to produce its own approach to climate change. In June 2009, the House narrowly passed H.R. 2454, a 1,428-page bill addressing a number of interrelated energy and climate change issues. Among its numerous provisions, the bill would have established capand-trade programs for GHG emissions, beginning in The Senate did not act, however: two Senate committees reported bills, 3 but the prospect of obtaining 60 votes for either bill appeared slim, and neither came to the floor. In the 112 th Congress, the focus was not on comprehensive legislation to address GHG emissions, but on legislation to prevent EPA from taking action on the issue. The result was the same, however: the House passed legislation; the Senate did not. Issues related to emissions from electric power plants principally sulfur dioxide (SO 2 ), nitrogen oxides (NOx), and mercury were another focus of interest in the 112 th Congress. Regulations addressing these emissions were vacated by the D.C. Circuit Court of Appeals in EPA developed new regulations to address the court s concerns, finalizing regulations to address SO 2 and NOx on July 6, 2011, 5 and mercury and other air toxics on December 21, Congress 1 Six greenhouse gases, or groups of gases, are addressed by EPA regulatory actions: carbon dioxide (CO 2 ), methane (CH 4 ), nitrous oxide (N 2 O), sulfur hexafluoride (SF 6 ), hydrofluorocarbons (HFCs), and perfluorocarbons (PFCs). Of these, carbon dioxide, produced by combustion of fossil fuels, is by far the most prevalent, accounting for 85% of annual emissions of the combined group when measured as CO 2 equivalents. 2 Massachusetts v. EPA, 549 U.S. 497 (2007). 3 The Environment and Public Works Committee reported S. 1733, and the Energy and Natural Resources Committee reported S North Carolina v. EPA, 531 F.3d 896 (D.C. Cir. 2008) addressed the sulfur dioxide and nitrogen oxides regulations, and New Jersey v. EPA, 517 F.3d 574 (D.C. Cir. 2008) addressed the mercury regulations. 5 The final rule appeared in the Federal Register August 8, See U.S. Environmental Protection Agency, Federal Implementation Plans: Interstate Transport of Fine Particulate Matter and Ozone and Correction of SIP Approvals, 76 Federal Register 48208, August 8, Explanatory material can be found at actions.html. The rule is generally referred to as the Cross-State Air Pollution Rule. 6 The final rule appeared in the Federal Register February 16, 2012, at 77 Federal Register 9304, and explanatory (continued...) Congressional Research Service 1

5 conducted numerous oversight hearings and considered legislation to overturn EPA s regulations. In this case, too, House-passed legislation died in the Senate. The Obama Administration s EPA also reviewed several Bush Administration and earlier decisions regarding national ambient air quality standards (NAAQS), as it is required to do by Section 109 of the Clean Air Act. NAAQS represent EPA s formal judgment regarding how clean the air must be to protect public health and welfare; the standards set in motion monitoring and planning requirements, which in turn lead to designation of nonattainment areas and the imposition of emission controls. On January 19, 2010, the agency proposed a more stringent NAAQS for ozone, having concluded that a 2008 revision to the standard did not satisfy the requirements of the Clean Air Act. As proposed, the NAAQS was projected to have both costs and benefits in the tens of billions of dollars. Amid heavy lobbying on both sides of the issue, EPA sent a final decision to the Office of Management and Budget for interagency review in July At the President s request, EPA withdrew the decision on September 2, 2011, and resumed implementation of the 2008 standard. On June 22, 2010, the agency promulgated revisions to the NAAQS for SO 2 ; 59 counties would violate the new SO 2 standard, based on the most recent monitoring data available at the time. 7 None violated the old standard. The agency also completed reviews of the NAAQS for four other pollutants, notably particulate matter (PM), which is emitted by a wide range of mobile and stationary sources. A revised PM standard was promulgated in December 2012, including a more stringent fine particulate (PM 2.5 ) standard. Congress paid close attention to the EPA reviews and, again, the House passed bills that were not acted on by the Senate. This report provides a brief overview of the climate change, power plant, and air quality standard issues, as well as information on other Clean Air Act issues that the 112 th Congress addressed. More detailed information on most of the issues can be found in other CRS reports, which are referenced throughout this report. EPA s Greenhouse Gas Regulations EPA s actions to regulate GHG emissions stem from more than a decade of petitions and litigation. Responding to a 1999 petition that it regulate greenhouse gases from new motor vehicles, the agency in 2003 denied that it had such authority, arguing that GHGs did not fall within the Clean Air Act s definition of air pollutants. The denial was challenged by Massachusetts, 11 other states, and various other petitioners in a case that ultimately reached the (...continued) materials are available at 7 EPA noted that the number of counties that would be formally designated nonattainment would likely be different from the 59 EPA identified, for two reasons. First, EPA promulgated changes to the monitoring requirements along with the new standard. Second, the actual designations would most likely be made based on monitoring data, whereas the 59 counties were identified using data. Congressional Research Service 2

6 Supreme Court. In an April 2, 2007 decision (Massachusetts v. EPA), the Court found by 5-4 that EPA does have authority to regulate greenhouse gas emissions, since the emissions are clearly air pollutants under the Clean Air Act s definition of that term. 8 The Court s majority concluded that EPA must, therefore, decide whether emissions of these pollutants from new motor vehicles contribute to air pollution that may reasonably be anticipated to endanger public health or welfare, or provide a reasonable explanation why it cannot or will not make that decision, such as that there is insufficient information to make the decision. If it makes an endangerment finding, the act requires the agency to establish standards for emissions of the pollutants. On December 15, 2009, acting in response to the Court s decision, EPA finalized an endangerment finding for greenhouse gas emissions from motor vehicles, under Section 202(a) of the act. 9 Relying on this finding, EPA finalized GHG emission standards for new cars and light trucks, April 1, The implementation of these standards has, in turn, triggered permitting requirements and the imposition of Best Available Control Technology for new major stationary sources of GHGs beginning January 2, (For information on these regulations and permit requirements, see CRS Report R40506, Cars, Trucks, and Climate: EPA Regulation of Greenhouse Gases from Mobile Sources, and CRS Report R41212, EPA Regulation of Greenhouse Gases: Congressional Responses and Options.) The prospect of GHG standards for motor vehicles, which affect cars and light trucks beginning in model year 2012, has not been particularly controversial. On May 19, 2009, President Obama announced an agreement involving nine U.S. and foreign auto manufacturers; the federal government; the governors of California, Michigan, and Massachusetts; the United Auto Workers; and environmental groups under which EPA and the National Highway Traffic Safety Administration (NHTSA) would proceed with a joint rulemaking in which GHG emissions from new motor vehicles would be reduced under the Clean Air Act, while NHTSA would set corresponding fuel economy standards under the Corporate Average Fuel Economy (CAFE) program. 11 The objective of the new greenhouse gas standards is to reach reduction levels similar to those adopted by the state of California and 13 other states, who will harmonize their standards with those of EPA as part of the agreement. The California standards required about a 30% reduction in GHG emissions from new vehicles by The auto industry supported the national 8 Massachusetts v. EPA, 549 U.S. 497 (2007). The majority held: The Clean Air Act s sweeping definition of air pollutant includes any air pollution agent or combination of such agents, including any physical, chemical... substance or matter which is emitted into or otherwise enters the ambient air Carbon dioxide, methane, nitrous oxide, and hydrofluorocarbons are without a doubt physical [and] chemical... substances[s] which [are] emitted into... the ambient air. The statute is unambiguous. For additional discussion, see CRS Report RS22665, The Supreme Court s Climate Change Decision: Massachusetts v. EPA, by Robert Meltz Federal Register While generally referred to as the endangerment finding (singular), the Federal Register notice consists of two separate findings: a Finding that Emissions of Greenhouse Gases Endanger Public Health and Welfare, and a Finding that Greenhouse Gases From Motor Vehicles Cause or Contribute to the Endangerment of Public Health and Welfare. 10 The standards appeared in the Federal Register May 7, 2010 at 75 Federal Register For additional information, including a link to the standards, see 11 The President s announcement and related documents, including a Notice of Upcoming Joint Rulemaking to Establish Vehicle GHG Emissions and CAFE Standards, which appeared in the May 22, 2009 Federal Register, and both the draft and final emission standards can be found at For additional information, see CRS Report R40166, Automobile and Light Truck Fuel Economy: The CAFE Standards, by Brent D. Yacobucci; or CRS Report R40506, Cars, Trucks, and Climate: EPA Regulation of Greenhouse Gases from Mobile Sources, by James E. McCarthy and Brent D. Yacobucci. Congressional Research Service 3

7 agreement, in part, to avoid having to meet standards on a state-by-state basis; thus, it has not supported efforts to block EPA s motor vehicle GHG standards. On July 29, 2011, the President announced a similar agreement with 13 U.S. and foreign auto manufacturers under which harmonized GHG and fuel economy standards would be set for model years This second round of standard development has led to regulations requiring a further reduction of about 35% in GHG emissions by 2025, with projected fleetwide fuel economy of 54.5 miles per gallon. The standards were finalized August 28, EPA has also promulgated GHG emission standards for medium- and heavy-duty trucks. EPA s endangerment finding specifically referenced medium- and heavy-duty trucks as among the sources that contribute to the GHG emissions for which it found endangerment. In addition, the National Highway Traffic Safety Administration (NHTSA) was required by Section 102 of the Energy Independence and Security Act of 2007 (EISA, P.L ) to promulgate fuel economy standards for medium- and heavy-duty trucks, reflecting the maximum feasible improvement in fuel efficiency. Thus, on August 9, 2011, EPA and NHTSA finalized integrated GHG emission standards and fuel economy standards for medium- and heavy-duty vehicles. 13 The standards will be phased in between 2014 and When fully implemented, they will require an average per vehicle reduction in GHG emissions of 17% for diesel trucks and 12% for gasoline-powered trucks. In addition to the motor vehicle GHG standards, EPA has received petitions asking the agency to regulate GHGs from a variety of other sources, including coal mines, concentrated animal feeding operations (CAFOs), aircraft, ocean-going ships, nonroad engines and equipment (e.g., construction equipment, farm equipment, recreational equipment, forklifts, harbor craft, and lawn and garden equipment), and fuels. Another petition asks the agency to set National Ambient Air Quality Standards for seven specific greenhouse gases. The agency has also faced lawsuits seeking to force it to regulate GHGs from a variety of sources, including power plants, petroleum refineries, nonroad vehicles and engines, and the Portland cement industry. The decisions to move forward on GHG standards for new motor vehicles have been seen by many as precedents for these other potential standards, 14 and, indeed, EPA has begun to move forward on GHG standards for a broader set of emission sources. On December 23, 2010, the agency announced that it had reached a settlement agreement with 11 states, the City of New York, the District of Columbia, and 3 environmental groups under which it would propose GHG emission standards for power plants by July 26, 2011, and for refineries by December 10, 2011, with promulgation by May 2012 and November 2012 respectively. The power plant deadline was later extended, and proposed regulations (for new units only) were released March 27, The agency did not propose guidelines for existing units, and it is unclear when it will do so. The The standards appeared in the September 15, 2011, Federal Register. U.S. Environmental Protection Agency, U.S. Department of Transportation, Greenhouse Gas Emissions Standards and Fuel Efficiency Standards for Medium- and Heavy-Duty Engines and Vehicles; Final Rules, 76 Federal Register For a further discussion of these issues, see CRS Report R40984, Legal Consequences of EPA s Endangerment Finding for New Motor Vehicle Greenhouse Gas Emissions, by Robert Meltz, CRS Report R40506, Cars, Trucks, and Climate: EPA Regulation of Greenhouse Gases from Mobile Sources, by James E. McCarthy and Brent D. Yacobucci, and archived CRS Report R40585, Climate Change: Potential Regulation of Stationary Greenhouse Gas Sources Under the Clean Air Act, by Larry Parker and James E. McCarthy. Congressional Research Service 4

8 agency also missed the December 2011 deadline for proposal of refinery standards; it is unclear when these regulations will be proposed. Even without EPA decisions on these petitions or the proposal of standards for specific industries, the adoption of GHG standards for motor vehicles has triggered GHG permit requirements for new stationary sources, as a result of language in Section 165 of the act. That section requires preconstruction permits and the imposition of best available control technology for new major sources of all pollutants subject to regulation under the act. The permit requirements began to take effect January 2, It is this triggering of standards for stationary sources (power plants, manufacturing facilities, and others) that appears to have raised the most concern in Congress: legislation has been considered in both the House and Senate aimed at preventing EPA from implementing these requirements. Legislation on Climate Change In the 112 th Congress, introduced legislation took several forms. The broadest legislation (such as Representative Upton s and Senator Inhofe s H.R. 910/S. 482) would have repealed EPA s endangerment finding, redefined air pollutants to exclude greenhouse gases, prohibited EPA from promulgating any regulation to address climate change, and prohibited EPA from granting the state of California future waivers allowing it to control GHG emissions from mobile sources. 15 H.R. 910 passed the House April 7, 2011, A Senate amendment identical to H.R. 910 (S.Amdt. 183) failed on a vote of 50-50, April 6, The provisions of H.R. 910 were passed again by the House as Title II of H.R. 3409, September 21, Some of the other bills or amendments introduced in the 112 th Congress would have: suspended EPA actions regulating stationary source emissions of GHGs for two years (Senator Rockefeller s S. 231 and Representative Capito s H.R. 199). Senator Rockefeller s bill, introduced as S.Amdt. 215 to S. 493, a bill dealing with small business innovation, failed on a vote of 12-88, April 6, 2011; 16 enacted EPA s Tailoring Rule into statutory law (Senator Baucus s S.Amdt. 236). Senator Baucus s amendment failed on a vote of 7-93, April 6, 2011; amended the Clean Air Act to provide that greenhouse gases are not subject to the act (Representative Blackburn s H.R. 97); prohibited EPA from using funds to implement or enforce cap-and-trade programs or other requirements pertaining to stationary sources of GHG emissions (Representative Poe s H.R. 153); prohibited any federal agency, in carrying out any act or program to reduce the effects of greenhouse gas emissions on climate change, from imposing a fee or 15 Senator Barrasso s S. 228 and Representative Walberg s H.R. 750 were similar to the Upton/Inhofe bill in many respects, including listing a dozen EPA regulatory actions that would be repealed. In addition, the Barrasso/Walberg bill would have prevented citizens from using common law or civil tort (including nuisance) to seek liability, money damages, or injunctive relief arising from any potential or actual contribution of a greenhouse gas to climate change. 16 Another amendment that would have provided a two-year moratorium, Senator Stabenow s and Senator Sherrod Brown s S.Amdt. 277, also failed, by a vote of Congressional Research Service 5

9 tax on gaseous emissions emitted directly by livestock (Representative Fortenberry s H.R. 279); or prohibited U.S. regulation of carbon dioxide until China, India, and Russia implement similar reductions (Senator Vitter s S. 15). Meanwhile, EPA itself promulgated regulations and guidance that delayed the applicability of requirements for stationary sources of GHGs until 2011 and focused its initial permitting efforts on the largest emitters, granting smaller sources at least a six-year reprieve. 17 Although stand-alone legislation to restrict EPA s authority has received a great deal of attention, restricting the agency s authority to use funds to take specific GHG regulatory actions through riders on the EPA appropriation seems the more likely avenue by which Congress might limit EPA action. The overall appropriation bill to which it would be attached might contain other elements that would make it more difficult to veto. This approach was discussed at some length as early as 2009, when Senator Murkowski introduced (but ultimately did not offer) an amendment to the FY2010 Interior, Environment, and Related Agencies Appropriation Act (S.Amdt. 2530). It came forward in several forms in the 112 th Congress. In FY2011, appropriations for EPA and the rest of the government were provided by a series of continuing resolutions. In the House, in February 2011, language similar to H.R. 153 was added to the Full-Year Continuing Appropriations Act, 2011 bill (H.R. 1) during floor debate, on a vote (H.Amdt. 101). H.R. 153, and H.R. 1 as amended, would have prohibited EPA funding for implementing or enforcing a greenhouse gas cap-and-trade program or any other greenhouse gas regulatory requirement on stationary sources issued or effective after January 1, 2011 (including the permitting requirements that took effect January 2). However, the Senate failed to pass the bill, 44-56, March 9, The final FY2011 budget agreement (H.R. 1473) did not include restrictions on EPA s greenhouse gas regulatory authority. Both the FY2012 and FY2013 EPA appropriations bills (H.R and H.R. 6091, as reported by the House Appropriations Committee) contained major restrictions on EPA s GHG regulatory authorities, but the provisions were not enacted. The FY2012 bill came to the House floor under an open rule during the last week of July, 2011, and about 200 amendments were filed for consideration. Action on the bill was suspended July 28, with more than 150 amendments still pending. EPA s FY2012 appropriation ultimately was included in a consolidated appropriations act, P.L , which contained no new restrictions. The FY2013 appropriation met a similar fate. It was among the funding measures included in a six-month continuing resolution that House and Senate leaders agreed to consider in September The resolution (P.L ) did not include policy provisions such as major new restrictions on EPA s GHG regulatory authority. 17 The two rules that have these effects are: Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule, final rule, 75 Federal Register 31514, June 3, 2010; and Reconsideration of Interpretation of Regulations that Determine Pollutants Covered by Clean Air Act Permitting Programs, final rule, 75 Federal Register 17004, April 2, Congressional Research Service 6

10 (For a more detailed discussion of EPA s regulatory actions and potential congressional responses, see CRS Report R41212, EPA Regulation of Greenhouse Gases: Congressional Responses and Options. For information on EPA Appropriations, see CRS Report R41896, Interior, Environment, and Related Agencies: FY2012 Appropriations, and CRS Report R42520, Environmental Protection Agency (EPA): Appropriations for FY2013.) Emissions from Power Plants In addition to climate change, other clean air issues with a shorter time horizon are being addressed by EPA and have been the subject of congressional action. Many of these have to do with emissions from electric power plants. Coal-fired power plants are among the largest sources of air pollution in the United States. Under the Clean Air Act, however, they have not necessarily been subject to stringent requirements: emissions and the required control equipment can vary depending on the location of the plant, when it was constructed, whether it has undergone major modifications, the specific type of fuel it burns, and, to some extent, the vagaries of EPA enforcement policies. More than half a dozen separate Clean Air Act programs could potentially be used to control emissions, which makes compliance strategy complicated for utilities and difficult for regulators. Because the cost of the most stringent available controls, for the entire industry, could range into the tens of billions of dollars, power companies have fought hard and rather successfully to limit or delay regulations affecting them, particularly with respect to plants constructed before the Clean Air Act of 1970 was passed. As a result, emissions from power plants have not been reduced as much as those from some other sources. Many plants built in the 1950s and 1960s (generally referred to as grandfathered plants) have little emission control equipment. Collectively, power plants are large sources of pollution. In 2005, they accounted for 10.2 million tons of sulfur dioxide (SO 2 ) emissions (70% of the U.S. total), 53 tons of mercury emissions (50% of the U.S. total), and 3.6 million tons of nitrogen oxides (19% of the U.S. total). Power plants are also considered major sources of fine particles (PM 2.5 ), many of which form in the atmosphere from emissions from a wide range of stationary and mobile sources. In addition, power plants account for about 40% of U.S. anthropogenic emissions of the greenhouse gas carbon dioxide. With new ambient air quality standards for ozone, fine particles, and SO 2 taking effect, emissions of NOx and SO 2 will necessarily have to be reduced to meet standards. 18 (These standards are discussed below under Air Quality Standards. ) For more than a decade, mercury emissions have also been a focus of concern. Mercury emitted by power plants and other sources is deposited in water bodies and is taken up through the food chain: all 50 states have issued fish consumption advisories due to mercury pollution, covering 16.8 million acres of lakes, 1.25 million river miles, and the coastal waters of 20 entire states. 19 A continuing controversy over the 18 NOx contributes to the formation of ozone and fine particles; SO 2, besides being a regulated pollutant in its own right, is among the sources of fine particles. 19 See U.S. EPA, National Listing of Fish Advisories: Technical Fact Sheet, September 2009, at scitech/swguidance/fishshellfish/fishadvisories/tech2008.cfm#synopsis. Congressional Research Service 7

11 interpretation of New Source Review requirements for existing power plants (which require the installation of Best Available Control Technology whenever an existing power plant undergoes major modifications) has exerted pressure for a more predictable regulatory structure, as well. Thus, some in industry, environmental groups, Congress, and the last three Administrations have said that legislation addressing power plant pollution in a comprehensive (multi-pollutant) fashion would be desirable. Such legislation could address the major pollutants on a coordinated schedule and could rely, to a large extent, on a system such as the one used in the acid rain program, where national or regional caps on emissions are implemented through a system of tradable allowances. Despite this broad support in principle, for a variety of reasons, comprehensive multi-pollutant legislation has gone nowhere. Bills were routinely introduced beginning in the late 1990s, but none made it to the House or Senate floor. The lack of congressional action left it to EPA, beginning in the Bush Administration, to fashion emission standards for power plants, using existing Clean Air Act authority. Cross-State Air Pollution/Clean Air Interstate Rule (CAIR) On March 10, 2005, the agency announced that it would promulgate regulations similar to those in its multi-pollutant bill (the Clear Skies bill) for utility emissions of SO 2 and NOx in 28 eastern states and the District of Columbia. 20 These regulations, the Clean Air Interstate Rule (CAIR), established cap-and-trade provisions for the two pollutants. 21 CAIR covered only the eastern half of the country, but since most of the grandfathered generation capacity is located in the East and South, EPA projected that nationwide emissions of SO 2 would decline 53% by 2015 and NOx emissions 56%. 22 The agency also projected that the rule would result in $85-$100 billion in health benefits annually by 2015, including the annual prevention of 17,000 premature deaths. CAIR s health and environmental benefits would be more than 25 times greater than its costs, according to EPA. North Carolina v. EPA CAIR was one of the few Bush Administration environmental initiatives that was generally supported by environmentalists. It also had broad support in the regulated community. But a variety of petitioners, including the state of North Carolina, which argued that the rule was not strong enough to address pollution from upwind sources, and some individual utilities that felt they were unfairly treated by the rule s emission budgets, challenged the rule in the D.C. Circuit, and the court vacated it July 11, A unanimous court found that although EPA had established a significant contribution made by power plants to nonattainment of standards and failure to maintain standards in downwind states, as required by Section 110 of the Clean Air Act, the agency s methodology for establishing emission budgets for each state was unrelated to the state s contribution to the nonattainment and maintenance problems in specific downwind 20 The rule appeared in the Federal Register two months later. See U.S. EPA, Ambient air quality standards, national Fine particulate matter and ozone; interstate transport control measures, 70 Federal Register 25162, May 12, A separate regulation, the Clean Air Mercury Rule (CAMR), promulgated at the same time, established a Clear- Skies-like cap-and-trade system for mercury emissions. It is described in a separate section below. 22 As compared to nationwide emissions from electric generating units in Some of the projected reduction would be due to pre-existing regulations. See U.S. EPA, Office of Air and Radiation, Regulatory Impact Analysis for the Final Clean Air Interstate Rule, March 2005, pp. 3-3 and 3-4, at Congressional Research Service 8

12 states. 23 The court also found that the choice of 2015 for a second phase compliance deadline, based on technological and economic feasibility, ignored EPA s statutory mandate. It found the fuel adjustment factors in the rule (which set more stringent requirements for natural gas- and oilfired plants than for coal-fired ones) to be arbitrary and capricious. It concluded: CAIR s flaws are deep. No amount of tinkering... will transform CAIR, as written, into an acceptable rule. 24 Despite the seemingly high hurdle set by the language the court used, EPA, environmental groups, and the utility and mining industries asked the court to review its decision. On December 23, 2008, the court modified its decision, allowing CAIR to remain in effect until a new rule is promulgated by EPA. 25 The court was not specific about how long this process would be allowed to take, but stated: Though we do not impose a particular schedule by which EPA must alter CAIR, we remind EPA that we do not intend to grant an indefinite stay of the effectiveness of this court s decision. Our opinion revealed CAIR s fundamental flaws, which EPA must still remedy. 26 Although they differ on the details of what they support, states, electric utilities, and environmental groups have all supported a replacement that is similar to CAIR in many respects. Without CAIR, most eastern states would have huge gaps in their emission control programs, which would have to be filled by other regulatory measures if the states are to attain the NAAQS by the statutory deadlines. For the utilities, CAIR was designed to build on the existing regulatory framework of cap-and-trade programs under the acid rain program and the NOx SIP Call. 27 Anticipating the ability to bank and trade emission allowances under CAIR, numerous utilities had already installed equipment to meet or exceed CAIR s requirements, the first phase of which have now been implemented. Environmental groups have argued for a stronger version of CAIR particularly its second phase, to be implemented in 2015 but they generally support the basic approach. The CAIR Phase 1 rules already appear to be having substantial effects. In 2010, EPA reported, SO 2 emissions from fossil-fueled power plants in the lower 48 states (at 5.1 million tons) were 49% below 2005 levels. NOx emissions from the same sources declined to 2.1 million tons in 2010, 42% less than in EPA s CAIR Replacement: The Cross-State Air Pollution Rule On July 6, 2011, EPA finalized a replacement for CAIR, the Cross-State Air Pollution Rule. 29 The Cross-State rule would leave the CAIR Phase 1 limits in place and would have established a 23 North Carolina v. EPA, 531 F.3d 896 (D.C. Cir. 2008). 24 Id. at North Carolina v. EPA, 550 F.3d 1176 (D.C. Cir. 2008). 26 Ibid. 27 The acid rain program, established by the Clean Air Act Amendments of 1990, set up a cap-and-trade program for sulfur dioxide emissions from electric generating units. Implementation began in The NOx SIP Call, implemented in 2004, is a cap-and-trade program for control of nitrogen oxide emissions in the eastern half of the country. 28 Data are from EPA s National Emissions Inventory, at 29 The final rule appeared in the Federal Register August 8, See U.S. EPA, Federal Implementation Plans: Interstate Transport of Fine Particulate Matter and Ozone and Correction of SIP Approvals, 76 Federal Register Background material can be found on EPA s website at Congressional Research Service 9

13 second and third phase of reductions in 2012 and 2014, with particular emphasis on SO 2 emissions of which would decline to 2.4 million tons in the covered states (73% below 2005 levels) in The rule would cover 28 Eastern, Midwestern, and Southern states and the District of Columbia. It is a modified cap-and-trade rule. It would allow unlimited trading of allowances within individual states. Interstate trading would be allowed so long as a state remains within 18%-21% of its emissions caps. Limiting interstate trading is intended to address the D.C. Circuit s ruling, which found CAIR s unlimited interstate allowance trading program unlawful. In order to insure that the rule would be implemented quickly, EPA promulgated a Federal Implementation Plan (FIP) for each of the states: the FIPs specified emission budgets for each state based on controlling emissions from electric power plants. States would be free to develop their own State Implementation Plans and may choose to control other types of sources if they wish, but the federal plan would take effect until the state acts to replace it. EPA estimates that the Cross-State rule will cost the power sector $2.4 billion annually in 2014, but it expects the benefits to be 50 to 120 times as great an estimated $120 billion to $280 billion annually. The most important benefit would be 13,000 to 34,000 fewer premature deaths annually. Avoided deaths and other benefits occur throughout the East, Midwest, and South, according to EPA, with Ohio and Pennsylvania benefitting the most. 30 Judicial and Legislative Options for Overturning the Cross-State Rule In the 112 th Congress, both the House and Senate considered legislation that would have revoked the Cross-State rule. The House bill (H.R. 2401) passed on September 23, It would have declared the rule of no force and effect, reinstating the CAIR rule in its place. The bill would also have required a study of the cumulative impact of the Cross-State Rule and about a dozen other regulatory actions, would have prohibited EPA from proposing a replacement until at least three years after completion of the study, and would have provided at least a further three years after promulgation before compliance could be required; it would also have required that any replacement rule allow trading of emission allowances among entities in all affected states. The Senate did not take up the House bill, but it did consider S.J.Res. 27, a resolution of disapproval of the rule under the Congressional Review Act (CRA). If a CRA resolution disapproving a rule is enacted, the rule cannot take effect, and the agency may not reissue either that rule or any substantially similar one, except under authority of a subsequently enacted law. S.J.Res. 27 was rejected by the Senate, 41-56, on November 10, Although unsuccessful in Congress, opponents of the rule did prevail in court. At least 45 parties filed suit asking the D.C Circuit Court of Appeals to review the rule (the cases were consolidated as EME Homer City Generation L.P. v. EPA ). On August 21, 2012, in a 2-1 decision, the court vacated and remanded the rule, finding that EPA s imposition of Federal Implementation Plans, without first giving the states an opportunity to develop their own plans, was unlawful. The court also held that EPA s emission budgets (which were based on what the agency considered costeffective controls) may require states to reduce their emissions by amounts greater than their significant contribution to nonattainment in downwind states. 31 The agency subsequently asked 30 U.S. EPA, Office of Air and Radiation, Final Air Pollution Cross-State Air Pollution Rule, Overview Presentation, undated, pp , at 31 EME Homer City Generation, L.P. v. EPA, 696 F.3d 7 (D.C. Cir. 2012). Congressional Research Service 10

14 the full D.C. Circuit to review the decision en banc. As of December 2012, the court had not ruled on the agency s request. The Utility MACT/MATS Rule: Addressing Mercury and Other Hazardous Air Pollutants Background The Clean Air Act also provides authority for EPA to regulate emissions of mercury and other hazardous air pollutants (HAPs, or air toxics ) from electric generation units. Much of this discussion has focused on mercury. Electric generating units account for about half of all mercury emissions in the United States. Mercury is a potent neurotoxin that can cause adverse health effects (principally delayed development, neurological defects, and lower IQ in fetuses and children) at very low concentrations. 32 The principal route of exposure to mercury is through consumption of fish. Mercury enters water bodies, often through air emissions, and is taken up through the food chain, ultimately affecting humans as a result of fish consumption. As noted earlier, all 50 states have issued fish consumption advisories due to mercury pollution, covering 16.8 million acres of lakes, 1.25 million river miles, and the coastal waters of 20 entire states. Regulation of mercury emissions from coal-fired power plants has a complicated legislative and regulatory history, dating back to the 1990 Clean Air Act Amendments. EPA was required by that legislation and a 1998 consent agreement to determine whether regulation of mercury from power plants under Section 112 of the Clean Air Act was appropriate and necessary. Section 112 is the section that regulates emissions of hazardous air pollutants. In general, it requires EPA to set standards based on the Maximum Achievable Control Technology (a term defined with great precision in the act), and to impose the MACT standards at each individual emissions source. In a December 2000 regulatory finding, EPA concluded that regulation of mercury from power plants under Section 112 was appropriate and necessary. The finding added coal- and oil-fired electric generating units to the list of sources of hazardous air pollutants, and triggered other provisions of the 1998 consent agreement: the agency was to propose MACT standards for them by December 15, 2003, and finalize the standards by March 15, Rather than promulgate MACT standards, however, EPA reversed its December 2000 finding in March 2005, and established through regulations a national cap-and-trade system for power plant emissions of mercury, the Clean Air Mercury Rule (CAMR). Under CAMR, the final cap would have been 15 tons of emissions nationwide in 2018 (about a 70% reduction from 1999 levels, when achieved). There would also have been an intermediate cap of 38 tons in 2010, well above EPA s projection of emissions in that year. 33 Under the cap-and-trade system, utilities could either control the pollutant directly or purchase excess allowances from other plants that instituted controls more stringently or sooner than 32 For a discussion of mercury s health effects, see CRS Report RL32420, Mercury in the Environment: Sources and Health Risks. 33 The agency projected emissions at 31 tons in 2010 even if 99% of the generating units installed no mercury control equipment. Congressional Research Service 11

15 required. As with the acid rain and CAIR cap-and-trade programs, early reductions under CAMR could have been banked for later use, which the agency itself said would result in utilities delaying compliance with the full 70% reduction until after (For additional information on the mercury rule, see CRS Report RL32868, Mercury Emissions from Electric Power Plants: An Analysis of EPA s Cap-and-Trade Regulations.) New Jersey v. EPA The CAMR rule was challenged in petitions for review filed by New Jersey and 16 other states as well as other petitioners. 35 The D.C. Circuit, in a 3-0 decision handed down February 8, 2008, 36 vacated the rule. The court found that once the agency had listed electric generating units (EGUs) as a source of hazardous air pollutants, it had to proceed with MACT regulations under Section 112 of the act unless it delisted the source category, under procedures the act sets forth in Section 112(c)(9). Delisting would have required the agency to find that no EGU s emissions exceeded a level adequate to protect public health with an ample margin of safety, and that no adverse environmental effect would result from any source a difficult test to meet, given the agency s estimate that EGUs were responsible for 46% of mercury emissions from all U.S. sources at the time. Rather than delist the EGU source category, the agency had maintained that it could simply reverse its December 2000 appropriate and necessary finding, a decision that was much simpler because there were no statutory criteria to meet. The court found this approach unlawful. This explanation deploys the logic of the Queen of Hearts, substituting EPA s desires for the plain text of Section 112(c)(9), the court said in its opinion. 37 Other Mercury/Air Toxics Issues Besides the question of whether EPA complied with the law s requirements, critics found other reasons to oppose EPA s cap-and-trade approach to controlling mercury. One of the main criticisms has been that it would not address hot spots, areas where mercury emissions and/or concentrations in water bodies are greater than elsewhere. In fact, under a cap-and-trade system, nothing would prevent emissions from increasing at hot spots. Many also argued that the mercury regulations should have been more stringent or implemented more quickly than the cap-and-trade regulations would have required. These arguments found a receptive audience in the states: about 20 states have promulgated requirements stricter than the federal Clean Air Mercury Rule program, with several requiring 80% to 90% mercury reductions before (For additional information, see archived CRS Report RL33535, Mercury Emissions from Electric Power Plants: States Are Setting Stricter Limits.) Another shortcoming of the 2005 Clean Air Mercury Rule was that it didn t address emissions of hazardous air pollutants other than mercury. In the analysis accompanying EPA s current proposal, the agency states that EGUs are sources of 12 other HAPs, including three acid gases and nine toxic metals. 34 U.S. EPA, Regulatory Impact Analysis of the Final Clean Air Mercury Rule, Table 7-3, p. 7-5, at 35 Seven other states joined EPA in defending the rule. 36 New Jersey v. EPA, 517 F.3d 574 (D.C. Cir. 2008). 37 Id. at 582. Congressional Research Service 12

16 The Utility MACT/Mercury and Air Toxics Standards On December 21, 2011, EPA responded to the New Jersey v. EPA court decision by finalizing what is referred to as the Utility MACT or, more recently, the Mercury and Air Toxics Standards (MATS). 38 A proposed version that appeared in the Federal Register on May 3, 2011, began a public comment period that ran through August 4 of that year. Public hearings were held in Atlanta, Chicago, and Philadelphia, and the agency was reported to have received 960,000 public comments. The Utility MACT will require coal-fired power plants to achieve about a 90% reduction from uncontrolled emissions of mercury, nine other toxic metals, and three acid gases, all of which were listed by Congress as hazardous air pollutants in the 1990 Clean Air Act Amendments. Power plants are the largest emitters of many of these pollutants, accounting for about 50% of the nation s mercury emissions, 62% of its arsenic emissions, and 82% of its hydrochloric acid emissions, for example. 39 The Utility MACT will also reduce emissions of fine particulates (PM 2.5 ). In proposing the standards, EPA noted that while the requirements are stringent for those facilities lacking controls, 56% of existing coal-fired power plants already are equipped with controls that will allow them to meet the standards. Thus, the standards are expected to level the playing field, bringing older, poorly controlled plants up to the standards that a majority of the existing units are able to achieve. 40 In this respect, the proposed standards reflect the statute s requirement that existing sources of HAPs should meet standards based on the current emissions of the best performing similar sources. New facilities face more stringent requirements than existing units. Whether the new unit standards are achievable has been one of the issues raised by stakeholders, including the manufacturers of emissions control and monitoring equipment. The latter have focused on the standard for mercury emissions from new plants, questioning whether available monitoring equipment can detect mercury emissions at the level required by the standards. EPA agreed to reconsider this issue, and stayed implementation of the new source portion of the standards. On November 16, 2012, the agency proposed to modify the rule s standards for mercury emissions from new coal-fired power plants: 41 the proposed standard, if finalized, will allow 15 times as much mercury to be emitted as would have been allowed under the standard finalized in December The rule appeared in the Federal Register, February 16, 2012, at 77 Federal Register For a link to the rule as well as explanatory material, see U.S. EPA, Final Mercury and Air Toxics Standards (MATS) for Power Plants, at 39 See U.S. EPA, Memorandum: Emissions Overview: Hazardous Air Pollutants in Support of the Final Mercury and Air Toxics Standard, November 2011, Tables 4, 5, and 6, at EmissionsOverviewMemo.pdf. 40 The agency also concludes that some plants, representing less than 10 Gw of coal-fired capacity, would be retired by 2015, rather than invest in control technologies. In all, it says, coal-fired generation would decline about 2%. 41 U.S. EPA, Reconsideration of Certain New Source and Startup/Shutdown Issues: National Emission Standards for Hazardous Air Pollutants from Coal- and Oil-Fired Electric Utility Steam Generating Units and Standards of Performance for Fossil-Fuel-Fired Electric Utility, Industrial-Commercial-Institutional, and Small Industrial- Commercial-Institutional Steam Generating Units, Proposed Rules, November 16, 2012, at airquality/powerplanttoxics/pdfs/ proposal.pdf. Congressional Research Service 13